Dhiraj Nayyar

The three-day G20 Summit in Bali, Indonesia, commenced on Sunday, with India ready to assume the presidency of the grouping on December 1. Prime Minister Narendra Modi must use his formidable leadership to once again elevate G20 to a forum where the world’s largest economies actually work on a coordinated action plan to dig the global economy out of its biggest economic crisis in half a century.

The inherent problem with such high-profile groupings is that often they end up being used for grandstanding, or expression of good intentions without commitments by different nations and individual leaders. India can make it more substantive.

It is useful to recall the history of G20. Originally, it was conceived as a forum for finance ministers and central bank governors. It was upgraded to head of government level in 2008 in the aftermath of the Global Financial Crisis. Before and after, it was essentially imagined as a forum for economic policy coordination. Indeed, it worked well in the aftermath of the 2008 crisis, enabling coordinated policy responses that saved much of the world from a prolonged period of economic pain.

Unfortunately, as a forum, G20 has been missing through the pandemic. There was virtually zero coordination on the supply and rollout of vaccines. It also was found lacking teeth in tackling the economic fallout of the post-stimulus, post-Russia-Ukraine war scenario. The world has had to battle the adverse effects of the pandemic, excess stimulus, and war/sanctions as individual countries rather than as a collective. Needless to say, the outcomes are suboptimal. There is rampant inflation, particularly in advanced economies, but also in emerging ones. There are food shortages. There is an imminent recession in much of the world. Standards of living are falling.

India’s challenge in embracing discordant states towards a common future

There are reasons why the G20 hasn’t responded in the same way to the current bout of crisis as it did in 2008. The nature of global politics changed in the 2010s. The mood turned decidedly against globalization, most notably in the two countries that had parented globalization – the US and Britain. In the US, the election of Donald Trump was a vote against free trade and free immigration. In Britain, the vote for Brexit, around the same time, was also a revolt on free trade, free immigration, and closer economic union with other countries. Both ‘Make America Great Again’ (Maga) and Brexit was based on ‘going it alone’.

Meanwhile, politics was also changing in the country that had been the biggest beneficiary of globalization since 1980: China. Courtesy trade, it had transformed from a poor developing country to a rich and consequential country in one generation. But China, under Xi Jinping’s leadership, made a turn towards more nationalist politics eschewing the quiet internationalism of his predecessors since Deng Xiaoping.

That has changed the way the rest of the world looks at China, more as a threat than a source of growth. Vladimir Putin’s misadventure in Ukraine was the final fracture in any pretense of cooperation and coordination in the G20, where the US, Britain, China, and Russia are all important members.

It will not be an easy task for India to lead such a fractured G20 membership into substantive cooperation and coordination. It does help that India enjoys strong relationships of trust with every G20 country with the exception of China. It must leverage that to shape the global order. It must also place India at the center of that emerging order.

Though G20 is not a forum for geopolitics, Modi must use his presidency to work towards an end to the Russia-Ukraine war. The global economy is paying too heavy a price for the distrust between the West and Russia. He may or may not succeed, but it is worth trying. It will make a real impact on the lives of those struggling with cost-of-living issues all over the world.

The forum must also be leveraged to cement India’s position as the ‘China plus one for global manufacturing. While other countries are also candidates for attracting global value chains, India’s size and democracy give it an advantage – China has only size. If investment and manufacturing does shift to India, it can become an engine for the global economy, which a smaller country cannot.

For the next two decades, India can play the role that China played previously. As the world looks to emerge from the current morass, India with its strong fundamentals and fast growth is a beacon of hope. India’s theme for its presidency is ‘One Earth, One Family, One Future’, based on ‘Vasudhaiva kutumbakam’. The challenge is to reunite a quarrelsome family and refocus its energies on ‘One Future’.

This article was first published in the Economic Times as G20: India’s challenge would be to reunite a quarrelsome family and refocus on ‘One Future’ on Nov 14, 2022

About the author

Dhiraj Nayyar

Dhiraj Nayyar, Chief Economist at Vedanta and Guest Writer at IMPRI Impact.

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